4.5. CHAPTER FIVE:
"Piracy"

There is piracy of copyrighted material. Lots of it.
This piracy comes in many forms. The most significant is
commercial piracy, the unauthorized taking of other people's
content within a commercial context. Despite the many
justifications that are offered in its defense, this taking
is wrong. No one should condone it, and the law should stop
it.

But as well as copy-shop piracy, there is another kind of
"taking" that is more directly related to the Internet. That
taking, too, seems wrong to many, and it is wrong much of the
time. Before we paint this taking "piracy," however, we
should understand its nature a bit more. For the harm of this
taking is significantly more ambiguous than outright copying,
and the law should account for that ambiguity, as it has so
often done in the past.

4.5.1. Piracy
I

All across the world, but especially in Asia and
Eastern Europe, there are businesses that do nothing but
take others people's copyrighted content, copy it, and sell
it--all without the permission of a copyright owner. The
recording industry estimates that it loses about $4.6
billion every year to physical piracy[1] (that works out to one in three CDs
sold worldwide). The MPAA estimates that it loses $3
billion annually worldwide to piracy.

This is piracy plain and simple. Nothing in the
argument of this book, nor in the argument that most people
make when talking about the subject of this book, should
draw into doubt this simple point: This piracy is
wrong.

Which is not to say that excuses and justifications
couldn't be made for it. We could, for example, remind
ourselves that for the first one hundred years of the
American Republic, America did not honor foreign
copyrights. We were born, in this sense, a pirate nation.
It might therefore seem hypocritical for us to insist so
strongly that other developing nations treat as wrong what
we, for the first hundred years of our existence, treated
as right.

That excuse isn't terribly strong. Technically, our law
did not ban the taking of foreign works. It explicitly
limited itself to American works. Thus the American
publishers who published foreign works without the
permission of foreign authors were not violating any rule.
The copy shops in Asia, by contrast, are violating Asian
law. Asian law does protect foreign copyrights, and the
actions of the copy shops violate that law. So the wrong of
piracy that they engage in is not just a moral wrong, but a
legal wrong, and not just an internationally legal wrong,
but a locally legal wrong as well.

True, these local rules have, in effect, been imposed
upon these countries. No country can be part of the world
economy and choose not to protect copyright
internationally. We may have been born a pirate nation, but
we will not allow any other nation to have a similar
childhood.

If a country is to be treated as a sovereign, however,
then its laws are its laws regardless of their source. The
international law under which these nations live gives them
some opportunities to escape the burden of intellectual
property law.[2] In
my view, more developing nations should take advantage of
that opportunity, but when they don't, then their laws
should be respected. And under the laws of these nations,
this piracy is wrong.

Alternatively, we could try to excuse this piracy by
noting that in any case, it does no harm to the industry.
The Chinese who get access to American CDs at 50 cents a
copy are not people who would have bought those American
CDs at $15 a copy. So no one really has any less money than
they otherwise would have had.[3]

This is often true (though I have friends who have
purchased many thousands of pirated DVDs who certainly have
enough money to pay for the content they have taken), and
it does mitigate to some degree the harm caused by such
taking. Extremists in this debate love to say, "You
wouldn't go into Barnes & Noble and take a book off of
the shelf without paying; why should it be any different
with on-line music?" The difference is, of course, that
when you take a book from Barnes & Noble, it has one
less book to sell. By contrast, when you take an MP3 from a
computer network, there is not one less CD that can be
sold. The physics of piracy of the intangible are different
from the physics of piracy of the tangible.

This argument is still very weak. However, although
copyright is a property right of a very special sort, it is
a property right. Like all property rights, the copyright
gives the owner the right to decide the terms under which
content is shared. If the copyright owner doesn't want to
sell, she doesn't have to. There are exceptions: important
statutory licenses that apply to copyrighted content
regardless of the wish of the copyright owner. Those
licenses give people the right to "take" copyrighted
content whether or not the copyright owner wants to sell.
But where the law does not give people the right to take
content, it is wrong to take that content even if the wrong
does no harm. If we have a property system, and that system
is properly balanced to the technology of a time, then it
is wrong to take property without the permission of a
property owner. That is exactly what "property" means.

Finally, we could try to excuse this piracy with the
argument that the piracy actually helps the copyright
owner. When the Chinese "steal" Windows, that makes the
Chinese dependent on Microsoft. Microsoft loses the value
of the software that was taken. But it gains users who are
used to life in the Microsoft world. Over time, as the
nation grows more wealthy, more and more people will buy
software rather than steal it. And hence over time, because
that buying will benefit Microsoft, Microsoft benefits from
the piracy. If instead of pirating Microsoft Windows, the
Chinese used the free GNU/Linux operating system, then
these Chinese users would not eventually be buying
Microsoft. Without piracy, then, Microsoft would lose.

This argument, too, is somewhat true. The addiction
strategy is a good one. Many businesses practice it. Some
thrive because of it. Law students, for example, are given
free access to the two largest legal databases. The
companies marketing both hope the students will become so
used to their service that they will want to use it and not
the other when they become lawyers (and must pay high
subscription fees).

Still, the argument is not terribly persuasive. We
don't give the alcoholic a defense when he steals his first
beer, merely because that will make it more likely that he
will buy the next three. Instead, we ordinarily allow
businesses to decide for themselves when it is best to give
their product away. If Microsoft fears the competition of
GNU/Linux, then Microsoft can give its product away, as it
did, for example, with Internet Explorer to fight Netscape.
A property right means giving the property owner the right
to say who gets access to what--at least ordinarily. And if
the law properly balances the rights of the copyright owner
with the rights of access, then violating the law is still
wrong.

Thus, while I understand the pull of these
justifications for piracy, and I certainly see the
motivation, in my view, in the end, these efforts at
justifying commercial piracy simply don't cut it. This kind
of piracy is rampant and just plain wrong. It doesn't
transform the content it steals; it doesn't transform the
market it competes in. It merely gives someone access to
something that the law says he should not have. Nothing has
changed to draw that law into doubt. This form of piracy is
flat out wrong.

But as the examples from the four chapters that
introduced this part suggest, even if some piracy is
plainly wrong, not all "piracy" is. Or at least, not all
"piracy" is wrong if that term is understood in the way it
is increasingly used today. Many kinds of "piracy" are
useful and productive, to produce either new content or new
ways of doing business. Neither our tradition nor any
tradition has ever banned all "piracy" in that sense of the
term.

This doesn't mean that there are no questions raised by
the latest piracy concern, peer-to-peer file sharing. But
it does mean that we need to understand the harm in
peer-to-peer sharing a bit more before we condemn it to the
gallows with the charge of piracy.

For (1) like the original Hollywood, p2p sharing
escapes an overly controlling industry; and (2) like the
original recording industry, it simply exploits a new way
to distribute content; but (3) unlike cable TV, no one is
selling the content that is shared on p2p services.

These differences distinguish p2p sharing from true
piracy. They should push us to find a way to protect
artists while enabling this sharing to survive.

4.5.2. Piracy
II

The key to the "piracy" that the law aims to quash is a
use that "rob[s] the author of [his] profit."[4] This means we must
determine whether and how much p2p sharing harms before we
know how strongly the law should seek to either prevent it
or find an alternative to assure the author of his
profit.

Peer-to-peer sharing was made famous by Napster. But
the inventors of the Napster technology had not made any
major technological innovations. Like every great advance
in innovation on the Internet (and, arguably, off the
Internet as well[5]), Shawn Fanning and crew had simply
put together components that had been developed
independently.

The result was spontaneous combustion. Launched in July
1999, Napster amassed over 10 million users within nine
months. After eighteen months, there were close to 80
million registered users of the system.[6] Courts quickly shut Napster
down, but other services emerged to take its place. (Kazaa
is currently the most popular p2p service. It boasts over
100 million members.) These services' systems are different
architecturally, though not very different in function:
Each enables users to make content available to any number
of other users. With a p2p system, you can share your
favorite songs with your best friend-- or your 20,000 best
friends.

According to a number of estimates, a huge proportion
of Americans have tasted file-sharing technology. A study
by Ipsos-Insight in September 2002 estimated that 60
million Americans had downloaded music--28 percent of
Americans older than 12.[7] A survey by the NPD group quoted in
The New York Times estimated that 43 million citizens used
file-sharing networks to exchange content in May 2003.[8] The vast majority
of these are not kids. Whatever the actual figure, a
massive quantity of content is being "taken" on these
networks. The ease and inexpensiveness of file-sharing
networks have inspired millions to enjoy music in a way
that they hadn't before.

Some of this enjoying involves copyright infringement.
Some of it does not. And even among the part that is
technically copyright infringement, calculating the actual
harm to copyright owners is more complicated than one might
think. So consider--a bit more carefully than the polarized
voices around this debate usually do--the kinds of sharing
that file sharing enables, and the kinds of harm it
entails.

File sharers share different kinds of content. We can
divide these different kinds into four types.

There are some who use sharing networks as
substitutes for purchasing content. Thus, when a new
Madonna CD is released, rather than buying the CD,
these users simply take it. We might quibble about
whether everyone who takes it would actually have
bought it if sharing didn't make it available for free.
Most probably wouldn't have, but clearly there are some
who would. The latter are the target of category A:
users who download instead of purchasing.

There are some who use sharing networks to sample
music before purchasing it. Thus, a friend sends
another friend an MP3 of an artist he's not heard of.
The other friend then buys CDs by that artist. This is
a kind of targeted advertising, quite likely to
succeed. If the friend recommending the album gains
nothing from a bad recommendation, then one could
expect that the recommendations will actually be quite
good. The net effect of this sharing could increase the
quantity of music purchased.

There are many who use sharing networks to get
access to copyrighted content that is no longer sold or
that they would not have purchased because the
transaction costs off the Net are too high. This use of
sharing networks is among the most rewarding for many.
Songs that were part of your childhood but have long
vanished from the marketplace magically appear again on
the network. (One friend told me that when she
discovered Napster, she spent a solid weekend
"recalling" old songs. She was astonished at the range
and mix of content that was available.) For content not
sold, this is still technically a violation of
copyright, though because the copyright owner is not
selling the content anymore, the economic harm is
zero--the same harm that occurs when I sell my
collection of 1960s 45-rpm records to a local
collector.

Finally, there are many who use sharing networks
to get access to content that is not copyrighted or
that the copyright owner wants to give away.

How do these different types of sharing balance
out?

Let's start with some simple but important points. From
the perspective of the law, only type D sharing is clearly
legal. From the perspective of economics, only type A
sharing is clearly harmful.[9] Type B sharing is illegal but plainly
beneficial. Type C sharing is illegal, yet good for society
(since more exposure to music is good) and harmless to the
artist (since the work is not otherwise available). So how
sharing matters on balance is a hard question to
answer--and certainly much more difficult than the current
rhetoric around the issue suggests.

Whether on balance sharing is harmful depends
importantly on how harmful type A sharing is. Just as
Edison complained about Hollywood, composers complained
about piano rolls, recording artists complained about
radio, and broadcasters complained about cable TV, the
music industry complains that type A sharing is a kind of
"theft" that is "devastating" the industry.

While the numbers do suggest that sharing is harmful,
how harmful is harder to reckon. It has long been the
recording industry's practice to blame technology for any
drop in sales. The history of cassette recording is a good
example. As a study by Cap Gemini Ernst & Young put it,
"Rather than exploiting this new, popular technology, the
labels fought it."[10] The labels claimed that every album
taped was an album unsold, and when record sales fell by
11.4 percent in 1981, the industry claimed that its point
was proved. Technology was the problem, and banning or
regulating technology was the answer.

Yet soon thereafter, and before Congress was given an
opportunity to enact regulation, MTV was launched, and the
industry had a record turnaround. "In the end," Cap Gemini
concludes, "the `crisis' . . . was not the fault of the
tapers--who did not [stop after MTV came into being]--but
had to a large extent resulted from stagnation in musical
innovation at the major labels."[11]

But just because the industry was wrong before does not
mean it is wrong today. To evaluate the real threat that
p2p sharing presents to the industry in particular, and
society in general--or at least the society that inherits
the tradition that gave us the film industry, the record
industry, the radio industry, cable TV, and the VCR--the
question is not simply whether type A sharing is harmful.
The question is also how harmful type A sharing is, and how
beneficial the other types of sharing are.

We start to answer this question by focusing on the net
harm, from the standpoint of the industry as a whole, that
sharing networks cause. The "net harm" to the industry as a
whole is the amount by which type A sharing exceeds type B.
If the record companies sold more records through sampling
than they lost through substitution, then sharing networks
would actually benefit music companies on balance. They
would therefore have little static reason to resist
them.

Could that be true? Could the industry as a whole be
gaining because of file sharing? Odd as that might sound,
the data about CD sales actually suggest it might be
close.

In 2002, the RIAA reported that CD sales had fallen by
8.9 percent, from 882 million to 803 million units;
revenues fell 6.7 percent.[12] This confirms a trend over the past
few years. The RIAA blames Internet piracy for the trend,
though there are many other causes that could account for
this drop. SoundScan, for example, reports a more than 20
percent drop in the number of CDs released since 1999. That
no doubt accounts for some of the decrease in sales. Rising
prices could account for at least some of the loss. "From
1999 to 2001, the average price of a CD rose 7.2 percent,
from $13.04 to $14.19."[13] Competition from other forms of
media could also account for some of the decline. As Jane
Black of BusinessWeek notes, "The soundtrack to the film
High Fidelity has a list price of $18.98. You could get the
whole movie [on DVD] for $19.99."[14]

But let's assume the RIAA is right, and all of the
decline in CD sales is because of Internet sharing. Here's
the rub: In the same period that the RIAA estimates that
803 million CDs were sold, the RIAA estimates that 2.1
billion CDs were downloaded for free. Thus, although 2.6
times the total number of CDs sold were downloaded for
free, sales revenue fell by just 6.7 percent.

There are too many different things happening at the
same time to explain these numbers definitively, but one
conclusion is unavoidable: The recording industry
constantly asks, "What's the difference between downloading
a song and stealing a CD?"--but their own numbers reveal
the difference. If I steal a CD, then there is one less CD
to sell. Every taking is a lost sale. But on the basis of
the numbers the RIAA provides, it is absolutely clear that
the same is not true of downloads. If every download were a
lost sale--if every use of Kazaa "rob[bed] the author of
[his] profit"--then the industry would have suffered a 100
percent drop in sales last year, not a 7 percent drop. If
2.6 times the number of CDs sold were downloaded for free,
and yet sales revenue dropped by just 6.7 percent, then
there is a huge difference between "downloading a song and
stealing a CD."

These are the harms--alleged and perhaps exaggerated
but, let's assume, real. What of the benefits? File sharing
may impose costs on the recording industry. What value does
it produce in addition to these costs?

One benefit is type C sharing--making available content
that is technically still under copyright but is no longer
commercially available. This is not a small category of
content. There are millions of tracks that are no longer
commercially available.[15] And while it's conceivable that some
of this content is not available because the artist
producing the content doesn't want it to be made available,
the vast majority of it is unavailable solely because the
publisher or the distributor has decided it no longer makes
economic sense to the company to make it available.

In real space--long before the Internet--the market had
a simple response to this problem: used book and record
stores. There are thousands of used book and used record
stores in America today.[16] These stores buy content from
owners, then sell the content they buy. And under American
copyright law, when they buy and sell this content, even if
the content is still under copyright, the copyright owner
doesn't get a dime. Used book and record stores are
commercial entities; their owners make money from the
content they sell; but as with cable companies before
statutory licensing, they don't have to pay the copyright
owner for the content they sell.

Type C sharing, then, is very much like used book
stores or used record stores. It is different, of course,
because the person making the content available isn't
making money from making the content available. It is also
different, of course, because in real space, when I sell a
record, I don't have it anymore, while in cyberspace, when
someone shares my 1949 recording of Bernstein's "Two Love
Songs," I still have it. That difference would matter
economically if the owner of the copyright were selling the
record in competition to my sharing. But we're talking
about the class of content that is not currently
commercially available. The Internet is making it
available, through cooperative sharing, without competing
with the market.

It may well be, all things considered, that it would be
better if the copyright owner got something from this
trade. But just because it may well be better, it doesn't
follow that it would be good to ban used book stores. Or
put differently, if you think that type C sharing should be
stopped, do you think that libraries and used book stores
should be shut as well?

Finally, and perhaps most importantly, file-sharing
networks enable type D sharing to occur--the sharing of
content that copyright owners want to have shared or for
which there is no continuing copyright. This sharing
clearly benefits authors and society. Science fiction
author Cory Doctorow, for example, released his first
novel, Down and Out in the Magic Kingdom, both free on-line
and in bookstores on the same day. His (and his
publisher's) thinking was that the on-line distribution
would be a great advertisement for the "real" book. People
would read part on-line, and then decide whether they liked
the book or not. If they liked it, they would be more
likely to buy it. Doctorow's content is type D content. If
sharing networks enable his work to be spread, then both he
and society are better off. (Actually, much better off: It
is a great book!)

Likewise for work in the public domain: This sharing
benefits society with no legal harm to authors at all. If
efforts to solve the problem of type A sharing destroy the
opportunity for type D sharing, then we lose something
important in order to protect type A content.

The point throughout is this: While the recording
industry understandably says, "This is how much we've
lost," we must also ask, "How much has society gained from
p2p sharing? What are the efficiencies? What is the content
that otherwise would be unavailable?"

For unlike the piracy I described in the first section
of this chapter, much of the "piracy" that file sharing
enables is plainly legal and good. And like the piracy I
described in chapter 4, much of this piracy is motivated by
a new way of spreading content caused by changes in the
technology of distribution. Thus, consistent with the
tradition that gave us Hollywood, radio, the recording
industry, and cable TV, the question we should be asking
about file sharing is how best to preserve its benefits
while minimizing (to the extent possible) the wrongful harm
it causes artists. The question is one of balance. The law
should seek that balance, and that balance will be found
only with time.

"But isn't the war just a war against illegal sharing?
Isn't the target just what you call type A sharing?"

You would think. And we should hope. But so far, it is
not. The effect of the war purportedly on type A sharing
alone has been felt far beyond that one class of sharing.
That much is obvious from the Napster case itself. When
Napster told the district court that it had developed a
technology to block the transfer of 99.4 percent of
identified infringing material, the district court told
counsel for Napster 99.4 percent was not good enough.
Napster had to push the infringements "down to zero."[17]

If 99.4 percent is not good enough, then this is a war
on file-sharing technologies, not a war on copyright
infringement. There is no way to assure that a p2p system
is used 100 percent of the time in compliance with the law,
any more than there is a way to assure that 100 percent of
VCRs or 100 percent of Xerox machines or 100 percent of
handguns are used in compliance with the law. Zero
tolerance means zero p2p. The court's ruling means that we
as a society must lose the benefits of p2p, even for the
totally legal and beneficial uses they serve, simply to
assure that there are zero copyright infringements caused
by p2p.

Zero tolerance has not been our history. It has not
produced the content industry that we know today. The
history of American law has been a process of balance. As
new technologies changed the way content was distributed,
the law adjusted, after some time, to the new technology.
In this adjustment, the law sought to ensure the legitimate
rights of creators while protecting innovation. Sometimes
this has meant more rights for creators. Sometimes
less.

So, as we've seen, when "mechanical reproduction"
threatened the interests of composers, Congress balanced
the rights of composers against the interests of the
recording industry. It granted rights to composers, but
also to the recording artists: Composers were to be paid,
but at a price set by Congress. But when radio started
broadcasting the recordings made by these recording
artists, and they complained to Congress that their
"creative property" was not being respected (since the
radio station did not have to pay them for the creativity
it broadcast), Congress rejected their claim. An indirect
benefit was enough.

Cable TV followed the pattern of record albums. When
the courts rejected the claim that cable broadcasters had
to pay for the content they rebroadcast, Congress responded
by giving broadcasters a right to compensation, but at a
level set by the law. It likewise gave cable companies the
right to the content, so long as they paid the statutory
price.

This compromise, like the compromise affecting records
and player pianos, served two important goals--indeed, the
two central goals of any copyright legislation. First, the
law assured that new innovators would have the freedom to
develop new ways to deliver content. Second, the law
assured that copyright holders would be paid for the
content that was distributed. One fear was that if Congress
simply required cable TV to pay copyright holders whatever
they demanded for their content, then copyright holders
associated with broadcasters would use their power to
stifle this new technology, cable. But if Congress had
permitted cable to use broadcasters' content for free, then
it would have unfairly subsidized cable. Thus Congress
chose a path that would assure compensation without giving
the past (broadcasters) control over the future
(cable).

In the same year that Congress struck this balance, two
major producers and distributors of film content filed a
lawsuit against another technology, the video tape recorder
(VTR, or as we refer to them today, VCRs) that Sony had
produced, the Betamax. Disney's and Universal's claim
against Sony was relatively simple: Sony produced a device,
Disney and Universal claimed, that enabled consumers to
engage in copyright infringement. Because the device that
Sony built had a "record" button, the device could be used
to record copyrighted movies and shows. Sony was therefore
benefiting from the copyright infringement of its
customers. It should therefore, Disney and Universal
claimed, be partially liable for that infringement.

There was something to Disney's and Universal's claim.
Sony did decide to design its machine to make it very
simple to record television shows. It could have built the
machine to block or inhibit any direct copying from a
television broadcast. Or possibly, it could have built the
machine to copy only if there were a special "copy me"
signal on the line. It was clear that there were many
television shows that did not grant anyone permission to
copy. Indeed, if anyone had asked, no doubt the majority of
shows would not have authorized copying. And in the face of
this obvious preference, Sony could have designed its
system to minimize the opportunity for copyright
infringement. It did not, and for that, Disney and
Universal wanted to hold it responsible for the
architecture it chose.

MPAA president Jack Valenti became the studios' most
vocal champion. Valenti called VCRs "tapeworms." He warned,
"When there are 20, 30, 40 million of these VCRs in the
land, we will be invaded by millions of `tapeworms,' eating
away at the very heart and essence of the most precious
asset the copyright owner has, his copyright."[18] "One does not have to
be trained in sophisticated marketing and creative
judgment," he told Congress, "to understand the devastation
on the after-theater marketplace caused by the hundreds of
millions of tapings that will adversely impact on the
future of the creative community in this country. It is
simply a question of basic economics and plain common
sense."[19] Indeed,
as surveys would later show, percent of VCR owners had
movie libraries of ten videos or more[20] --a use the Court would later hold
was not "fair." By "allowing VCR owners to copy freely by
the means of an exemption from copyright infringement
without creating a mechanism to compensate copyright
owners," Valenti testified, Congress would "take from the
owners the very essence of their property: the exclusive
right to control who may use their work, that is, who may
copy it and thereby profit from its reproduction."[21]

It took eight years for this case to be resolved by the
Supreme Court. In the interim, the Ninth Circuit Court of
Appeals, which includes Hollywood in its
jurisdiction--leading Judge Alex Kozinski, who sits on that
court, refers to it as the "Hollywood Circuit"--held that
Sony would be liable for the copyright infringement made
possible by its machines. Under the Ninth Circuit's rule,
this totally familiar technology--which Jack Valenti had
called "the Boston Strangler of the American film industry"
(worse yet, it was a Japanese Boston Strangler of the
American film industry)--was an illegal technology.[22]

But the Supreme Court reversed the decision of the
Ninth Circuit. And in its reversal, the Court clearly
articulated its understanding of when and whether courts
should intervene in such disputes. As the Court wrote,

Sound policy, as well as history, supports our
consistent deference to Congress when major technological
innovations alter the market for copyrighted materials.
Congress has the constitutional authority and the
institutional ability to accommodate fully the varied
permutations of competing interests that are inevitably
implicated by such new technology.[23]

Congress was asked to respond to the Supreme Court's
decision. But as with the plea of recording artists about
radio broadcasts, Congress ignored the request. Congress
was convinced that American film got enough, this "taking"
notwithstanding. If we put these cases together, a pattern
is clear:

Table 4-1. Table

CASE

WHOSE VALUE WAS
"PIRATED"

RESPONSE OF THE
COURTS

RESPONSE OF
CONGRESS

Recordings

Composers

No protection

Statutory
license

Radio

Recording
artists

N/A

Nothing

Cable TV

Broadcasters

No protection

Statutory
license

VCR

Film creators

No protection

Nothing

In each case throughout our history, a new technology
changed the way content was distributed.[24] In each case, throughout our
history, that change meant that someone got a "free ride"
on someone else's work.

In none of these cases did either the courts or
Congress eliminate all free riding. In none of these cases
did the courts or Congress insist that the law should
assure that the copyright holder get all the value that his
copyright created. In every case, the copyright owners
complained of "piracy." In every case, Congress acted to
recognize some of the legitimacy in the behavior of the
"pirates." In each case, Congress allowed some new
technology to benefit from content made before. It balanced
the interests at stake.

When you think across these examples, and the other
examples that make up the first four chapters of this
section, this balance makes sense. Was Walt Disney a
pirate? Would doujinshi be better if creators had to ask
permission? Should tools that enable others to capture and
spread images as a way to cultivate or criticize our
culture be better regulated? Is it really right that
building a search engine should expose you to $15 million
in damages? Would it have been better if Edison had
controlled film? Should every cover band have to hire a
lawyer to get permission to record a song?

We could answer yes to each of these questions, but our
tradition has answered no. In our tradition, as the Supreme
Court has stated, copyright "has never accorded the
copyright owner complete control over all possible uses of
his work."[25]
Instead, the particular uses that the law regulates have
been defined by balancing the good that comes from granting
an exclusive right against the burdens such an exclusive
right creates. And this balancing has historically been
done after a technology has matured, or settled into the
mix of technologies that facilitate the distribution of
content.

We should be doing the same thing today. The technology
of the Internet is changing quickly. The way people connect
to the Internet (wires vs. wireless) is changing very
quickly. No doubt the network should not become a tool for
"stealing" from artists. But neither should the law become
a tool to entrench one particular way in which artists (or
more accurately, distributors) get paid. As I describe in
some detail in the last chapter of this book, we should be
securing income to artists while we allow the market to
secure the most efficient way to promote and distribute
content. This will require changes in the law, at least in
the interim. These changes should be designed to balance
the protection of the law against the strong public
interest that innovation continue.

This is especially true when a new technology enables
a vastly superior mode of distribution. And this p2p has
done. P2p technologies can be ideally efficient in moving
content across a widely diverse network. Left to develop,
they could make the network vastly more efficient. Yet
these "potential public benefits," as John Schwartz writes
in The New York Times, "could be delayed in the P2P
fight."[26] Yet
when anyone begins to talk about "balance," the copyright
warriors raise a different argument. "All this hand waving
about balance and incentives," they say, "misses a
fundamental point. Our content," the warriors insist, "is
our property. Why should we wait for Congress to
`rebalance' our property rights? Do you have to wait before
calling the police when your car has been stolen? And why
should Congress deliberate at all about the merits of this
theft? Do we ask whether the car thief had a good use for
the car before we arrest him?"

"It is our property," the warriors insist. "And it
should be protected just as any other property is
protected."

Notes

See IFPI (International Federation of the
Phonographic Industry), The Recording Industry Commercial
Piracy Report 2003, July 2003, available at link
#14. See also Ben Hunt, "Companies Warned on Music
Piracy Risk," Financial Times, 14 February 2003, 11.

See Peter Drahos with John Braithwaite, Information
Feudalism: Who Owns the Knowledge Economy? (New York: The
New Press, 2003), 10­13, 209. The Trade-Related Aspects
of Intellectual Property Rights (TRIPS) agreement
obligates member nations to create administrative and
enforcement mechanisms for intellectual property rights,
a costly proposition for developing countries.
Additionally, patent rights may lead to higher prices for
staple industries such as agriculture. Critics of TRIPS
question the disparity between burdens imposed upon
developing countries and benefits conferred to
industrialized nations. TRIPS does permit governments to
use patents for public, noncommercial uses without first
obtaining the patent holder's permission. Developing
nations may be able to use this to gain the benefits of
foreign patents at lower prices. This is a promising
strategy for developing nations within the TRIPS
framework.

For an analysis of the economic impact of copying
technology, see Stan Liebowitz, Rethinking the Network
Economy (New York: Amacom, 2002), 144­90. "In some
instances . . . the impact of piracy on the copyright
holder's ability to appropriate the value of the work
will be negligible. One obvious instance is the case
where the individual engaging in pirating would not have
purchased an original even if pirating were not an
option." Ibid., 149.

See Clayton M. Christensen, The Innovator's Dilemma:
The Revolutionary National Bestseller That Changed the
Way We Do Business (New York: HarperBusiness, 2000).
Professor Christensen examines why companies that give
rise to and dominate a product area are frequently unable
to come up with the most creative, paradigm-shifting uses
for their own products. This job usually falls to outside
innovators, who reassemble existing technology in
inventive ways. For a discussion of Christensen's ideas,
see Lawrence Lessig, Future, 89­92, 139.

See Ipsos-Insight, TEMPO: Keeping Pace with Online
Music Distribution (September 2002), reporting that 28
percent of Americans aged twelve and older have
downloaded music off of the Internet and 30 percent have
listened to digital music files stored on their
computers.

See Cap Gemini Ernst & Young, Technology
Evolution and the Music Industry's Business Model Crisis
(2003), 3. This report describes the music industry's
effort to stigmatize the budding practice of cassette
taping in the 1970s, including an advertising campaign
featuring a cassette-shape skull and the caption "Home
taping is killing music." At the time digital audio tape
became a threat, the Office of Technical Assessment
conducted a survey of consumer behavior. In 1988, 40
percent of consumers older than ten had taped music to a
cassette format. U.S. Congress, Office of Technology
Assessment, Copyright and Home Copying: Technology
Challenges the Law, OTA-CIT-422 (Washington, D.C.: U.S.
Government Printing Office, October 1989), 145­56.

See Recording Industry Association of America, 2002
Yearend Statistics, available at link
#15. A later report indicates even greater losses.
See Recording Industry Association of America, Some Facts
About Music Piracy, 25 June 2003, available at link
#16: "In the past four years, unit shipments of
recorded music have fallen by 26 percent from 1.16
billion units in to 860 million units in 2002 in the
United States (based on units shipped). In terms of
sales, revenues are down 14 percent, from $14.6 billion
in to $12.6 billion last year (based on U.S. dollar value
of shipments). The music industry worldwide has gone from
a $39 billion industry in 2000 down to a $32 billion
industry in 2002 (based on U.S. dollar value of
shipments)."

By one estimate, 75 percent of the music released by
the major labels is no longer in print. See Online
Entertainment and Copyright Law--Coming Soon to a Digital
Device Near You: Hearing Before the Senate Committee on
the Judiciary, 107th Cong., 1st sess. (3 April 2001)
(prepared statement of the Future of Music Coalition),
available at link #18.

While there are not good estimates of the number of
used record stores in existence, in 2002, there were
7,198 used book dealers in the United States, an increase
of 20 percent since 1993. See Book Hunter Press, The
Quiet Revolution: The Expansion of the Used Book Market
(2002), available at link
#19. Used records accounted for $260 million in sales
in 2002. See National Association of Recording
Merchandisers, "2002 Annual Survey Results," available at
link #20.

See Transcript of Proceedings, In Re: Napster
Copyright Litigation at 34- 35 (N.D. Cal., 11 July 2001),
nos. MDL-00-1369 MHP, C 99-5183 MHP, available at link
#21. For an account of the litigation and its toll on
Napster, see Joseph Menn, All the Rave: The Rise and Fall
of Shawn Fanning's Napster (New York: Crown Business,
2003), 269­82.

These are the most important instances in our
history, but there are other cases as well. The
technology of digital audio tape (DAT), for example, was
regulated by Congress to minimize the risk of piracy. The
remedy Congress imposed did burden DAT producers, by
taxing tape sales and controlling the technology of DAT.
See Audio Home Recording Act of 1992 (Title 17 of the
United States Code), Pub. L. No. 102-563, 106 Stat. 4237,
codified at 17 U.S.C. §1001. Again, however, this
regulation did not eliminate the opportunity for free
riding in the sense I've described. See Lessig, Future,
71. See also Picker, "From Edison to the Broadcast Flag,"
University of Chicago Law Review 70 (2003): 293­96.